Join the Conversation

Congress wrestles with tax breaks for open space

John Ferro, Poughkeepsie Journal 12:24 p.m. EDT July 29, 2014

In 2012, Sunset Ridge Farm in Millerton was protected from development in a deal supported by tax deductions to property owners who donate land for conservation easements.(Photo: Courtesy of the Dutchess Land Conservancy)

Story Highlights

Old law allowed expanded benefits for donations of conservation easements.

Elliott Sleight began farming in the 1930s, working half a century on the 119-acre family-owned farm in the Town of LaGrange.

As he neared the end of his life, Sleight made one thing clear.

"I don't want to see all my green fields go into houses," he told his family, recalled his son, also named Elliott.

That wish came true last year when his heirs gave up the farm's development rights in a deal partially supported by tax benefits that have since expired.

In 2012, Sunset Ridge Farm in Millerton was protected from development in a deal supported by tax deductions to property owners who donate land for conservation easements. Sunset Ridge’s owners sold the development rights to their land below market value, in what is called a “bargain sale.” They were able to deduct the difference under tax law that has since expired and is being debated in Congress.(Photo: Courtesy of the Dutchess Land Conservancy)

The tax law encourages the protection of open space by creating deductions for charitable donations of conservation easements. In 2006, Congress approved a temporary expansion of those deductions. At the end of 2013, they expired.

On July 17, the House of Representatives voted to restore them.

The bill, part of a larger measure on charitable giving, received bipartisan support, including votes by both local congressmen — Republican Rep. Chris Gibson and Democrat Rep. Sean Patrick Maloney.

But it faces an uncertain future in the Senate.

It would restore higher levels of tax deductions that could make donations of conservation easements more attractive to landowners of comparatively modest means.

A cost estimate by the nonpartisan Congressional Budget Office in June estimated the measure would reduce revenues — and consequently increase federal budget deficits — by $1.1 billion over a 10-year period.

A conservation easement is a legal agreement between a landowner and a government agency or land trust. It places restrictions on future uses of property in order to protect scenic or agricultural value.

Often, the easements are purchased by governments or land trusts. But in some cases, a landowner will sign an easement for less than the market value of the land — or for no compensation at all. In those cases, the agreement can be considered a charitable donation.

The expanded benefit allowed landowners to deduct the value of a donation equal to no more than 50 percent of their adjusted gross income (AGI). Those deductions could be taken each year for 16 years.

The current law limits the deductions to 30 percent of a landowner's AGI over six years. That means a landowner with an adjusted gross income of $50,000 a year could claim a total of $90,000 in deductions — or 30 percent of $50,000 each year for six years — even if the value of the donated easement was $1 million.

Under the prior law, that landowner could claim 50 percent of $50,000 each year for 16 years, equaling $400,000 in deductions.

What's more, the expired law allowed qualified farmers and ranchers to deduct up to 100 percent of their AGI for 16 years.

"For landowners who were land rich, cash poor and did not have a substantial income, it is hard for them to come close to maxing out that deduction with the (30 percent) cap on adjusted gross income and the (six-year) time frame," said Seth McKee, land conservation director for the Poughkeepsie-based land trust, Scenic Hudson.

The Sleight family sold the development rights to the farm to the Town of LaGrange at below-market value. They claimed the difference as a charitable donation subject to the expanded tax benefit.

"It was not the prime consideration," said Elliott Sleight, 68. "The prime consideration was keeping this as open space. That was my parents' wish."

A similar deal in Millerton protected 208 acres of the Sunset Ridge Farm owned by Kevin Smith and other family members.

Again, the family sold the rights at below-market value in what is called a "bargain sale," claiming the difference as a charitable donation.

"Someone taking the step to donate their land, most of the time they do it out of love for the land," Smith said. "But having the tax break is definitely an incentive."

Rebecca Thornton, president of the Dutchess Land Conservancy, said the vast majority of the 270 easements it holds include a partial or outright land donation.

Although not all conservation easements result in direct public access, open space advocates say they preserve the agricultural and scenic character of local landscapes.

A study by the Land Trust Alliance found that after the tax benefits were first expanded in 2006, the pace of land conservation increased by a third.

"It means that we can really market conservation easements to a broader audience," Thornton said.

The measure to restore the expanded benefits has received support not just from land trusts, but also from environmental and sporting organizations ranging from the Environmental Defense Fund and The Nature Conservancy, to Ducks Unlimited and the National Rifle Association.